Black & Decker 2014 Annual Report Download - page 46

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The Company repurchased $28 million, $39 million and $1.074 billion of common stock in 2014, 2013 and 2012, respectively.
In December 2012, the Company executed an accelerated share repurchase ("ASR") contract of $850 million, which was
funded using proceeds from the sale of HHI. The ASR contract terms allowed for an initial delivery of 9.3 million shares, or
the equivalent of 80% of the notional value of the contract. The Company received an additional 1.6 million shares upon
settlement of the contract in April 2013. The Company also repurchased approximately 3.0 million shares of common stock
during the second quarter of 2012 for $200 million. Proceeds from the issuance of common stock totaled $71 million, $155
million and $126 million in 2014, 2013 and 2012, respectively. These amounts received mainly relate to the exercises of stock
options.
In January 2013, the Company elected to prepay the forward share purchase contract for $363 million, comprised of the $350
million purchase price, plus an additional amount related to the forward component of the contract. In August 2013, the
Company physically settled the contract, receiving 5.6 million shares and $19 million from the financial institution
counterparty representing a purchase price adjustment. The reduction of common shares outstanding was recorded at the
inception of the forward share purchase contract and factored into the calculation of weighted average shares outstanding.
Cash payments for dividends were $321 million, $313 million and $304 million in 2014, 2013 and 2012, respectively. The
increase in dividends in 2014 was primarily attributable to the increase in quarterly dividends per common share to $0.52 per
share, as announced in July 2014. The dividend paid to shareholders of record in December 2014 extended the Company's
record for the longest consecutive annual and quarterly dividend payments among industrial companies listed on the New York
Stock Exchange.
Fluctuations in foreign currency rates negatively impacted cash by $147 million and $45 million in 2014 and 2013,
respectively. The negative impact in 2014 was primarily driven by the continued strengthening of the U.S. Dollar, particularly
in the second half of the year, against the Company's major currencies, most notably the Euro, British Pound, Canadian Dollar,
Swedish Krona and Japanese Yen.
Credit Ratings and Liquidity:
The Company maintains strong investment grade credit ratings from the major U.S. rating agencies on its senior unsecured debt
(average A-), as well as its short-term commercial paper borrowings. In October 2014 Fitch changed their outlook on their A-
rating of the Company’s Sr. Debt from Negative to Stable. There were no other changes in any of the Companies credit ratings
during 2014.
The Company's debt capacity for its current ratings is impacted by the level of long (including current maturities) and short-
term debt, as presented in its financial statements as well as other obligations that ratings agencies and fixed income investors
deem to increase the level of financial burden on the Company. Those other obligations include, among other things, post-
retirement benefits, as presented in its financial statements. Post-retirement benefit obligations, and thereby the Company's debt
capacity and its credit rating, could potentially be impacted by significant reductions in interest rates and revisions to mortality
tables, as well as any corrections in the equity markets. The Company's projected benefit obligation at January 3, 2015 was
relatively consistent compared to December 28, 2013 as the positive impacts from the favorable return on plan assets, higher
employer contributions and foreign currency fluctuations offset the negative impacts from the revision in mortality tables and
decrease in discount rates. Refer to Note L, Employee Benefit Plans for further discussion.
Failure to maintain strong investment grade rating levels could adversely affect the Company’s cost of funds, liquidity and
access to capital markets, but would not have an adverse effect on the Company’s ability to access committed credit facilities.
On December 3, 2013, the Company issued $400 million 5.75% fixed-to-floating rate junior subordinated debentures maturing
December 15, 2053 (“2053 Junior Subordinated Debentures”) that bear interest at a fixed rate of 5.75% per annum, up to, but
excluding December 15, 2018. From and including December 15, 2018, the 2053 Junior Subordinated Debentures will bear interest
at an annual rate equal to three-month LIBOR plus 4.304%. The debentures subordination and long tenor provides significant
credit protection measures for senior creditors and as a result, the debentures were awarded a 50% equity credit by S&P and Fitch,
and a 25% equity credit by Moody's. The net proceeds of $392.0 million from the offering were primarily used to repay commercial
paper borrowings.
On December 3, 2013, the Company issued 3,450,000 Equity Units (the “Equity Units”), each with a stated value of $100 which
are initially comprised of a 1/10, or 10%, undivided beneficial ownership in a $1,000 principal amount 2.25% junior subordinated
note due 2018 and a forward common stock purchase contract (the “Equity Purchase Contract”). Each Equity Purchase Contract
obligates the holders to purchase approximately 3.5 to 4.3 million common shares. The subordination of the notes in the Equity
Units combined with the Equity Purchase Contracts resulted in the Equity Units being awarded a 100% equity credit by S&P, and
a 50% equity credit by Moody's. The Company received approximately $335 million in cash proceeds from the Equity Units, net